Hey, everyone, I think we'll just go ahead and get started since we're right on the dot here. Hello, and welcome to Burgundy Diamond Mines' Quarterly Activities Call for the quarter ending 31 March , 2024. My name is Ariella Cohen, and I'm the Senior Communications Advisor with Burgundy. I will introduce our presenters in a moment, but first, I'd like to cover some introductory comments and guidance for the call. Please note that today's session is being recorded, and at the end of the formal presentation, we will have a Q&A session. Please submit your questions using the chat function in the Q&A Zoom functionality at the bottom of your screen. The results communicated today reflect the three-month period from 1 January to 31 March , 2024.
The corresponding quarter in 2023 were referenced in the presentation, reflects the results from Arctic Canadian Diamond Company prior to Burgundy's transformative acquisition in July 2023. Unless otherwise stated, all dollar values are communicated in U.S. dollars. Any references to mine life enhancements are conceptual until formally confirmed in a renewed formal mine plan, which we are on track to deliver by the end of the year. Please also note the important notices and disclaimers made available in our presentation for your review. These include notices on financial advisory, advertising, past performance, future performance caution, as well as our reserves, mineral resources, and reporting. Next slide, please. Last but not least, I'd like to introduce our presenters today who will lead today's call. Kim Truter, CEO of Burgundy Diamond Mines, and Brad Baylis, CFO and Corporate Secretary.
With that, I'll just pass it on to Kim to do the overview.
Thanks, Ariella. Thanks for that great intro, and good morning, afternoon, everyone, wherever you are around the world. So we'll do the usual format where Brad and I will talk to the various slides. I'll cover some, and Brad will do some of the others. So I'll kick off with just a bit of an overview of what we'll talk about today. So roughly six topics. We'll start with ESG. We'll do a bit of a diamond industry overview. We'll talk again about the Burgundy strategy. Probably the highlight will be our operational and financial results, which Brad will take us through.
I'm sure you'll all be quite excited about hearing about the mine plan progress we're making, and then Brad will take us home with some of the sales information that and the activities we're doing. So we'll kick off with that. So if I just start off with ESG, which is obviously super important to everyone, we just put a few pictures in here. Obviously, the primary focus from our side is on community engagement. There's a lot of community engagement this quarter, and up on the screen, you can see some of the photographs from various community visits that occurred during the quarter. The middle one there is some of the operating team that went up to one community called Łutsel K'e. And then you can see some of the other photographs.
So fantastic and important process as we continue to build our, you know, relationships with communities, which has been strengthened over the last 25 years. The other thing is, obviously from an environmental point of view, we continue to maintain and uphold the, you know, the best possible environmental practices. And then from a safety point of view, a big focus has been on fatality prevention, and we've introduced some critical controls, and one in particular, which some of you might be familiar with from other operations around the world, which are called Life-Saving Rules. So we reinvigorated that. We introduced 12 Life-Saving Rules. You can see them up on the screen there, and these are mandatory rules that clarify the most important thing to keep people alive.
And, the consequence for either not following these rules, either from an incident point of view or from a disciplinary point of view, are quite important. And then on the bottom left there, you can see the pristine environment that we operate in, especially the water and the wildlife. So I think those visuals say it all. So very, very important focus of ours. Just kicking off with an overview of the market, and I think I've taken you through the slidable version of the slide before, but just to remind everyone of what the investment thesis is. So as a reminder, the global annual production of natural diamonds is circa 100 million carats. Burgundy is 4% of this global supply and the largest in the G7.
We are starting to see the Russian sanctions take some effect. A lot of that has been controlled in Antwerp, in Belgium, because there's a lot of effort to try and get the flow of diamonds to all go through Antwerp so that it gets certified. And so any of the Russian diamonds get blocked in Antwerp, and there have already been some consequences for people trying to bypass that system. The other thesis is that the market is undersupplied. There are only seven major producers. I've just spoken about the Russian sanctions, and it's increasing demand in the G7 consuming countries, and there'll be a few more mine closures in Canada this decade, including two in Canada, and eventually, we'll be the only producer in Northern America.
One of the features that we are seeing, and Brad will talk about this a little bit more later, but we are seeing the luxury brands, in particular, seeking Tier 1 long-term supply. They definitely do not want to see, have Russian diamonds in their mix, and we are benefiting greatly from that effort for them to actually get closer to the producers. I think what goes hand in hand with that is the vertical integration that we have, which really links the provenance very clearly and also helps with tracking and traceability. So that whole concept of provenance positions us very, very well. We, the next point there, we said it's an opportunity to take a leadership role. I think we've actually gone a bit beyond the opportunity.
We are taking a leadership role, and we're finding that people are really looking to us to do things differently, and they're enjoying the sort of the invigorated role that Burgundy is playing. And then just to finish off there, you can see we've got a, you know, very robust financial position, a pretty solid market cap, and hopefully will get better, and a very, very healthy, consolidated net cash position, including inventories of $25 million+. And you can see the graphs on the right, right-hand side there highlight what I've just said. So very, very important, that slide, in terms of why we're doing what we're doing and why we chose this industry.
I think the other one is just to, I guess, remind people of the roadmap we're following, that sort of underpins our strategy. The sort of three or four things there. So the first thing is we really wanna optimize our flagship or cornerstone asset, being Ekati, and we're very focused on meeting our mining targets and then optimizing the operations, both in terms of efficiency and cost and capital management, to just generally being very, very disciplined and very, very reliable. And so I think 10 months into the acquisition, I think we can safely say we're pretty much on top of that one. The second one is the capital investment or reinvestment and the mine life extension work. And I think you'll see today, we've made some tremendous progress on every single front in that regard.
I think we're very pleased with our progress there. And then, of course, the next step will be to start returning cash to shareholders. So once we've sort of reinvested in the asset and we've got it ticking along, is to really look at a robust capital allocation strategy via dividends or buybacks or whatever we can, so that we could return cash back to shareholders. And while all that's going on, we obviously will keep evaluating opportunities from an M&A point of view. There's obviously lots of interesting things unfolding. We obviously saw the news last night about BHP and Anglo American, and all those things will play in our favor as it shakes up the assets in the De Beers and elsewhere. So watch that space.
I'll hand over to Brad, and Brad will run us through about four or five slides of the operational and financial performance. So over to you, Brad.
Thanks, Kim. Yeah, so I'll just take you through some of the performance highlights over the last three months. So on the waste front, you know, way less waste processed during the Q1 of this year as compared to last year. And you know, the big driver for that is, you know, in 2023, there was a large waste backlog that the previous owners needed to catch up on. You know, as we're getting closer to the bottom of the Sable pit, we really don't have a lot of waste to continue to mine. And so, yeah, well behind last year's performance. On the ore tons mined, you know, again, stronger performance as compared to last year.
You know, in the Q1, we focused a little bit more on Sable than on Misery underground. You know, we had a few colder periods and the underground mine gets a little tougher to process during those periods. So we definitely, you know, moved the fleet and had them focus a bit more on the Sable movements. Tons processed slightly ahead from a year ago. Again, the performance of the process plant continues to be strong, and we expect that to continue for the remainder of the year. Carats recovered slightly down from last year, and this is more decision based on focus to move more tons out of Sable.
You know, the grade out of the Sable pit is definitely a lot lower than what we would get from Misery. So we will see the carats start to increase a lot during the Q2 as we start to process a lot more Misery ore in the Q2 of the year. From a revenue standpoint, just under $118 million for the year. We sold 1.3 million carats, $89 a carat, but on a normalized basis, closer to $90, $94, $95 a carat.
The reason that that we had the $89 a carat was we had some low-value carats that that were sold actually in 2023, but the payments didn't come through until until early 2024, so they were recorded in the Q1. So if I remove the impact of those carats, you get closer to the $95, $94, $95 a carat range, which is within expectations. You know, another thing I'll note on the sales side, we didn't have any special sales during the quarter, so again, that always is a bit of a drag on the $ per carat. You know, obviously, when we sell our high-value stones, we're gonna see an uplift in $ per carat.
EBITDA of $26 million for the quarter. So we always expect Q1 and Q2 of any particular year to be a little lower on the cash flow, just given the large resupply period that we go through during the winter road season. And then from a net debt position, so $43, just under $44 million net debt to end the quarter. Yeah, from a guidance perspective, so no change. We continue to stay on track. We don't, we haven't made any adjustments to our guidance. Yeah, and at this point, we see nothing to make any change there, and so we expect to continue to perform and meet all targets.
On the balance sheet side, so very strong balance sheet to end the quarter again. So continued kind of the performance that we ended the year with. So kind of some of the key numbers, I'll talk about the, you know, the cash and cash equivalents. So ended the quarter at $83 million versus $94 million to end Q4. You know, and really, given the large cash outlays that happened during Q1 and Q2, to end at $83 million was even higher than what our budgeted numbers were. Now, of note, we did not make a surety payment in Q1. We're still working with our surety providers to land on a go-forward agreement.
So we would've planned to make an $11 million payment towards our surety during the Q1. So that'll be made up as the year goes on. On the diamond inventory front, so basically ended the quarter flat from year-end. Again, kind of within the normal range based on our existing process. We will be as we've discussed previously, we are looking at ways of reducing that inventory and, you know, getting some of that off the balance sheet. So on a net debt perspective, so slightly less favorable than year-end, and basically that the difference is really the difference in cash.
Then when you factor in the net cash position, including diamond inventories, again, very strong position, again, slightly lower than year-end, and driven by the change in cash. Yeah, just, you know, as I mentioned earlier, just as a reminder to everyone that the sureties was something we inherited from the previous owners. But basically, this is an agreement that's in place in order to cover the closure obligations for the Ekati mine. And so, you know, the agreement that we inherited had us paying the full closure obligation by the end of Q2.
So we've got an agreement in place with our surety providers to extend that over a four-year life of mine kind of with a smoother profile to match that timeframe. Then, you know, as we've said before, as we continue to develop the mine life further, we will continue to work with our surety providers to look at a longer-term horizon on that. And yeah, we're still working through. There's nothing controversial happening. We're just working through the procedure here and getting the new agreement in place. So, hopefully we will have this closed off prior to the end of Q2, and then we'll announce that once it's completed.
And again, the benefit in 2024 is, you know, $130 million that's basically been moved out into future periods, so, compared to what the original agreement had. I'll pass it back to Kim, and he'll give you an update on the mine life.
Thanks, Brad. Generally all around, you can see some pretty solid numbers. So on the mine plan, we thought we'd just kind of remind people spatially when we talk about all these opportunities. So this is a sort of a new graphic we've developed. So the best way to sort of interpret it is you can obviously see visually where everything is. You can see the main camp right there in the middle, and the airport, and then you can see Sable up in the north part of the screen, and the Misery area down the bottom.
The two brown boxes are basically the current operations, so you can see Sable at the top, which is the open pit that carries on until the end of this year and possibly into early next year, doing about 60,000 tons a day. So that's one active mine, and then Misery down the bottom, as Brad mentioned, is the second underground mine. Then you can see the 5 boxes that we always talk about, and I'll just take you through them quickly on the screen here. So the first thing at the top is the Sable Underground. It's some tremendous progress being made. As we speak, we're doing active evaluation, both drilling and studies of the underground operation, and the portal's on track for development in August.
It is very much a priority for adding to the mine plan. Point Lake, as we've mentioned before, takes over from the Sable open pit. Production is likely in early 2025. There's about 24 million carats in that pit that we can mine, and I'll show you a slide later that just shows where we're up to there. The Misery Underground. Again, drilling scheduled in Q2 to test both the vertical and lateral extension of Misery. I'll show you a plan on that. Very much a priority as well. Fox Underground, we've mentioned, you can see where it is, just next to the airport there.
16.5 million carats, and, I think the total resource, both inferred and reserved, is about 26 million carats, but there's certainly about 16 of that, that can be readily mined from an underground mine, and, they're also a priority. And then the top left there, we've probably mentioned this before, is, there's a remnant, BHP Fox stockpile, which has got around about 1 million carats of very high-value diamonds sitting in it, ready to go. And so, that, that stockpile will be blended into the, the other mining sources over the next couple of years, and we'll use it as what we call a filler. So if, if there's ever a time to actually put it in, where the process plant is idling for whatever reason, we'll fill it up with that stockpile.
That stockpile alone represents just under $300 million of diamonds, so it adds quite a lot of revenue to the mine plan in the next couple of years. And then just some other points on the screen for your reference. We've mentioned many times how many other kimberlite pipes are on this property. You can see the Jay pipe down the bottom there. There's still 90 million carats in the Jay pipe, which we haven't even really had a close look at yet, but we will. You can see Leslie in the middle there, and there's a few others around. So a long queue of assets that we'll keep evaluating over time. Just going into a little bit more detail. So here's the Point Lake, which is effectively the next cab off the rank.
You can see the dewatering that's occurred up in the middle there in that photograph. Effectively, it's been where the water footprint is essentially now sitting over the kimberlite pipe itself. So that shows you about the size of the kimberlite pipe. And we dewatered to that point so that we can now start the waste stripping and the waste work around the circumference of the kimberlite pipe. You can see that top right-hand picture shows where we're doing the capping that's required to start off the waste rock storage area. And yeah, so this is a fantastic pipe. We'll use the Misery camp infrastructure, which is only two kilometers away, and as I said, that production will start in early 2025.
There's a bit of timing we'll have to work out to optimize as we wind down the Sable open pit and then wind up the Point Lake pit, so we don't want to have to be mining them both simultaneously. So, the longer we can squeeze any volume out of Sable, we'll do that, and then that'll potentially push Point Lake a bit further. But we're making sure that timing switch from Sable to Point Lake is optimal. The Sable underground, this project is advancing very, very quickly. As I mentioned, we're on track now to do the portal in August or possibly even earlier. We see this as very much a low-hanging fruit option that was not looked at by the previous owners, and it's one that we've put our finger on very, very quickly.
The drilling program that we're doing is answering two questions: how many diamonds are there at depth? And those results are pending. And then also, how big is the ore body? In other words, we have to delineate the size of the ore body so we can plan the underground mine and make sure we're doing all the underground infrastructure and putting it all in the right place. We aim to have the underground in our new mine plan and published by the end of the year, back to our previous feasibility study. Sorry, I've gone back with the other slides. Again, just to give you a few more graphics on the Sable Underground for those budding mining engineers on the call. You can see those two pictures in the middle.
On the left-hand side is the reverse circulation drilling that's been completed to effectively get more grade information. And on the right-hand side, you can see what's called the delineation holes. Those are the holes that work out the lateral extent of the pipe and also tell you where you're gonna locate your ramps and making sure you put your mine underground ramps in the right place as we come out of that portal. And you can see we've finished about a kilometer of drilling in March, and the other drilling will commence in this quarter. And you can see down the bottom left there, the RC samples actually waiting at the lab to be processed to have a look at the diamond quality, which we expect to continue.
So typically, the diamond qualities that we encounter at the top of the pipe will normally keep going, but we just need to confirm that. And then down the bottom there, you can see how that'll all play out in terms of timing. And again, as I said earlier on, well, the goal is to have the Sable Underground in the mine plan that we publish, towards the end of this year. So some really exciting stuff going on and fantastic work. Misery Underground, we've shown you something on the screen that you haven't seen before. We've talked previously about the actual main Misery pipe, which is the red pipe on the picture. It's been known for some time that there's actually a sort of an offshoot of the Misery pipe, which is shown there in green.
Previously, when we've talked about extending the life of Misery, we've primarily talked about deepening the existing underground mine. In other words, going vertically down in that red pipe that you can see on the right-hand side. But as we've been doing some of the drilling and thinking work around extending the life of Misery, we've taken a much closer look at the lateral extension, so getting into what we call the southwest extension of Misery, which is all the green on the screen. And so as we're doing some of this drilling to look at the vertical extension of Misery, we're taking the opportunity to also look sideways and go into that southwest extension. This is fantastic, fantastic news, really, because what this will do is it could potentially extend Misery by quite a few years.
And, again, the aim will be to have all this work done by the end of the year, and then to publish a new mine plan for Misery, which we're hoping will take it all the way out to 2030. So that's the game plan. And... Yes, and some very exciting news, because Misery, as Brad mentioned early on, is a very, very high-value pipe. Some of those wonderful yellow stones come out of Misery. So yeah, having Misery keep going for, you know, another five or six years will be fantastic news. And then I'll just hand it back to Brad. Brad's been doing some very exciting stuff on the sales side of things. So back to you, Brad.
Thanks, Kim. Yeah, and you can see the 23.15 carat stone there on the right-hand top corner. That's actually a stone that was recovered from Misery during Q1. It's a fantastic stone and, yeah, that's, you know, the longer we can keep the Misery mine going, the more of these we can find. So, yeah, very excited about that. Yeah, and like what Kim said earlier, you know, it's clear that for our—for a lot of the, especially the luxury brands, a lot of them are very focused on getting their supply chains in order and making sure that they understand where their input goods are coming from.
So we are getting a lot of calls from various customers looking to, you know, to secure supply chains and making sure that, you know, they can get into longer-term agreements to secure their supply for, you know, for provenance. So yeah, it's a great opportunity for Burgundy and given our G7 production. You know, and really, the Ekati product is really differentiated for three reasons. We've got a very high-quality mix. You know, it's very consistent. You know, so that's one thing that customers always comment on, is that the assortment of diamonds that come out of the mine is very consistent.
So when they come see the stones in Antwerp, you know, they are very consistent and able to not take a lot of time actually evaluating the stones before being able to bid on them. You know, the mine's been around for 25 years, and again, one of the things that we're working on is to try to keep it going for another 25 years. You know, and obviously, given the mine is in Canada, you know, it's very strong Tier 1 jurisdiction, and it's another thing that really differentiates the Ekati stones from others.
You know, one of the things we are looking at is kind of changing, challenging some of the status quo. You know, the way that our sales process works, and a lot of sales processes actually is really modeled after the De Beers process. And, you know, everybody kind of has 10 sales. Even our royalty process within Canada is kind of modeled after De Beers. So, you know, we are looking at ways of trying to break some of that status quo. Like I said, we, you know, we'd like to try to shorten the amount of time it's taking from goods, from the time they're mined and recovered in the process plant to the time that they're sold.
Currently, right now, it's, it takes about 8 weeks, is about our average from the time that the goods are valued in Yellowknife. So royalty from a royalty valuation standpoint to the time that they're actually sold in Antwerp. So a lot of opportunity for us to look at ways of shortening that pipeline. But we're gonna need definitely some help from some of our partners in order to do that, including the government. You know, obviously, everyone knows we've got our cutting and polishing facility in Perth, and you know, we've got our CanadaMark brand. So, you know, looking at ways of getting into some relationships for the Perth business.
So we are looking at a number of short- to long-term partnerships where we can manufacture goods, and you know, and link them to specific brands. So there are some exciting opportunities that we're looking at, and hopefully in the next few months, we'll be able to announce some of these things. One of the things that we're doing in Q2 is we're doing a trial of viewings of our goods in Dubai. So right now, kind of the two big sales hubs globally are Antwerp and Dubai.
And so one of the things that we're looking at is if we have a viewing in Dubai, in addition to our viewing in Antwerp, so we're doing it for our special sales, for our large stones. Will we get more customers, and will that lead to better prices? So, you know, we are gonna look at maybe doing this a couple of times, seeing what the response is, and just seeing how much additional customer participation we get. So, very excited about the results and seeing how that goes. And yeah, not last but not least, you know, we're continuing to collaborate with some industry sales partners.
Like I said, you know, looking at some sort of relationship sales. Currently, we're selling all of our goods via 100% auction. But we are looking at getting into some partnerships and potentially some longer term arrangements. And hopefully we'll have some of those to announce in the coming months. Just for the previous quarter, we did have three sales, so three regular sales. So we had one in January, one in February, and one in March. The one in March happened just at the end of the quarter. So some of those sales will, I think it was about $14 million or $15 million worth of those sales will roll into Q2.
So kind of had 2.75 of a sale in Q1. And then Q2, we've got planned our special sale, which is ongoing right now. We'll have the auction on Tuesday, and then we have 2 more regular sales for the next quarter. So I think that's it from a sales perspective. So, I'll hand it back to Ariella, and she'll field any questions.
Yeah, we actually have a couple questions here. We have a question from Mike. This is for either Kim or Brad. It says: Can you quickly comment on costs? What was the cost per carat for Q1 and CapEx spent?
Yeah, I think we'll take him, Mike. So I think the numbers run about $60 a carat, Brad, but can you confirm?
Yeah, that's right. Yeah, just over $60 a carat on a cash cost basis. CapEx, yeah, we had a pretty low quarter from a CapEx perspective. I think just under $3 million for capital for the quarter.
And I mean, just to comment more broadly on that, I think we've mentioned this before, but just worth reiterating. We are very, very focused on cash management. We've actually built a very, very rigorous rolling cash forecast process, which is a new process that gives us a very, very high degree of accuracy as to what's going on in the business, and it will roll out two years ahead. And we include the whole management team in looking at that, so that we can actually be preempting anything well in advance about how we can enhance our cash or increase our margin. And so on top of just managing cash, generally, we also focused on margin.
We're constantly monitoring whatever price we get per carat, and therefore our cost per carat, and making sure that margin is as big as we can keep it.
Another question, also from Mike, is: How is the mine resupply going, and what is the timing for debt repayments in 2024?
I'll answer the first question, Mike. So the resupply has gone fantastically. So the winter road is now closed, so all of the supplies that we needed to get up to the mine went without a hitch, even though the winter road season was slightly shorter than normal. But it's been fantastically well with no incidents, and we got a full supply of fuel and everything we needed. I think, I presume you're talking about debt repayments in relation to the 2L debt, but if that's the case, I'll let Brad jump onto it.
Yeah. So there's no debt repayment scheduled for 2024. Our current arrangement has the debt being repaid in 2026. So we'll just be making our normal interest payments for the year, but no debt repayment planned.
Yeah. So in terms of cash going out the door, Mike, I mean, it's obviously funding ongoing operations. It's funding the development of the mine, including the pre-strip for Point Lake when that occurs, and the work required to underpin the mine extension. The surety payment that Brad mentioned, as soon as we've got that agreement locked down, we'll start making the regular payments, so there'll be cash going to that, but nothing to debt.
Okay. Another question is: Are the new underground projects economic at $90 per carat price?
Yeah. Again, we'll tag team on this one. But I think as a principle, we've been very conservative in our price assumptions going forward. So I think we've mentioned this before on calls, that from a management point of view, we actually like to make very, very conservative price assumptions, and generally, we keep price quite flat, so that our management team are basically producing results based on their performance, not based on price. So it's really a cultural approach. But really, if you go back to all the mining extension options I was putting up on the screen earlier on, that's precisely why these are so important. We want a multi-source operation. That's one of the huge advantages of this asset, because there are so many kimberlite pipes available.
You really want to build a portfolio of mining sources, so it gives you the maximum flexibility to exploit the pipes that have got the highest value or the lowest cost or the best quality, whatever it is. So it's part of our strategy is to have multiple sources, which is why we're looking at five different options. So it de-risks the operation tremendously from both a price point of view or cost point of view, and then also from an operational point of view. So if something goes wrong, you've got multiple sources.
So that's a bit of a long-winded answer, but the short answer is, we're very much conscious of that $ per carat, and I can assure you that all of the projects we've been bringing online, we'll be making 100% sure they're economic. We won't, we won't be bringing anything online that is not economic. But you know, the ongoing—we will never let up around making sure that our costs for this business are fit for purpose, and so we're constantly looking at ways to improve efficiencies and reduce costs. So Brad, if you'd wanna fill in any gaps, mate.
Yeah, obviously, that's, that's why we're doing the feasibility studies, to make sure that, that the projects are actually feasible before we, before we make any final decision on them. You know, the one thing I will mention is, you know, the Fox, for, just for an example, the Fox pit, the, the, the $ per carat out of Fox is, is $300-$350 a carat. So not, not all pits are equal, and, so, so it's just an important thing to, to note.
Yeah, and Misery is similar, but Misery is also a very hard $ per carat. So that's why having a blend of carats from each of the different pipes, they all bring something to the party.
The next question is on the type of diamonds expected from Point Lake or Fox Underground. Are they yellows or any other color? And then the second part of the question is, any approximate info on the J- pipe down the track?
Yeah, Sam, I'll maybe ask that in reverse. To be honest, we haven't done a lot of work on J-pipe. We've been focusing on the project that give us the best bang for the buck in the short term. So we'll get to J probably a little bit later on. And so as you probably know, what we do know about J is that a lot of carats, it is located under a lake, and which is part of the technical challenge to mining J. But in all honesty, we haven't really looked at it, you know, since the acquisition, we haven't done a lot of work on it. In terms of the diamonds coming from Point Lake, to be... We don't really know yet.
We think they'll be quite similar to Sable. All indications are that the quality and it generally looks quite similar to Sable. There might be some interesting colors. Some of the original samples came back with some quite nice colored stones, not necessarily yellows like Misery, but there were some other interesting colors. We'll be taking... As we start mining it, you know, towards the probably later on this year, as we start digging into the kimberlite, we'll probably get a better feel for what the mix of stones that'll be coming from Point Lake. But we're hoping it'll be good upside. But, Sam, so hopefully, that'll be a nice surprise. We don't think it'll be a bad surprise, but we think it'll be a good surprise. So we'll, time will tell.
The next question is from Stuart. Can you please confirm the auctions outlook for the remaining 2024 quarter? Q1, will it be 2x normal, 1x special, and what about Q3 and four?
Yeah, I think Brad already answered that one. So, Q2 is what you've said there, Stuart, so 2 normal, 1 special. Which means we'll have done what for the year? We'll have done 6 auctions for the year up until the end of Q2. And remember, we do roughly 13 for the whole year, so that means 13 minus 6 gives you 7 in the H2 of the year. So that's roughly what will be happening. Is that about right, Brad?
Yeah, that's about right. And one of the things we actually are looking at is potentially rolling our special goods into the regular auction. So instead of doing a separate auction for the large fancy stones, we're looking at potentially rolling those into the regular sales. Again, it's a bit of a cash flow opportunity, where instead of holding onto these stones, we can move them during our regular auction. So it's something we're gonna evaluate during Q2.
We also, from a cash management point of view, as Brad mentioned, we don't wanna be—we don't wanna keep being locked into the sort of 10-sale cycle phenomena. So we will be looking at whether we can, you know, have a sale, for example, every month, rather than, you know, every one every second month. And that'll also help smooth our cash flow profile. So that's something we're very conscious of, is can we actually have more sales, more often, try not make our revenue numbers lumpy as it currently is. And then we're also exploring other sales channels to pull diamonds through faster if it lends itself to us.
There's a few other things we can't talk about yet, but quite a few initiatives on getting those sales faster, getting the revenue less lumpy, and also having other sales channels for high-value stones.
Next question is from Patrick. Can you give a very brief comment on plans and timing for Ellendale, Western Australia?
Yeah, Patrick, there's really not much to update. I think, as you probably know from our previous correspondence, we basically have walked away from Ellendale from an operational point of view. We've done the necessary rehab that was required, in terms of anything that we had disturbed. And all that's left, from an Ellendale point of view, is any ongoing environmental monitoring that may be required by the regulators. But that really does conclude our involvement in Ellendale, and we have no further plans for it.
Okay. Next question is from Kamal around the URM. How is the URM trial proceeding, and is there any results?
... Yeah, thanks, Kamal. Look, the, we've always said that the URM is very much an R&D project, and we have it ticking along in the background. We're constantly evaluating when to introduce the URM, you know, especially when you compare it to some of those other options that I had on the screen early on. The floating platform has arrived in at this mine site. So just to remind people, the actual underwater remote mining technology it look mainly consists of two pieces of technology at this stage. It's a floating platform, which floats on the body of water above the kimberlite pipe.
And then there's a mining crawler, which is attached to that floating platform, that is, it mines underwater, and that is actually the mining tool that mines the kimberlite, and it pumps it back to that platform. And then the floating platform pumps it to shore, and then the material gets trucked to the process plant. So what we're having a look at is just when to actually do the trial. I think it's most likely we'll bring the second piece of the URM equipment up the winter road in 2025, and then more than likely, we'll probably do a trial in 2026, possibly 2027.
But we're just making sure that we prioritize some of those mine extension options, but at the same time, keep the URM work ticking along in the background. So I hope that answers your question, Kamal.
The next question is around the Russian ban. If the Russians are banned from selling diamonds into the West, and De Beers has no supply growth and potentially changing ownership, how can rough prices not go significantly higher in coming years, given there seems to be no supply around, and demand for diamond jewelry keeps growing?
All I can say is 100%. Well, we would love it if that occurs. I mean, obviously, that would be fantastic if it does occur. We're not relying on that, but it'll be fantastic if that does happen. But, you know, you go back to that investment thesis slide that I covered, I think it was the first slide I covered. I mean, this is just one of many reasons why we think it's such a fabulous business to be in. I think the other thing that's happening around the world, I mean, the macroeconomics of the world, I think, are heading more favorably.
So as we see interest rates start falling, and consumers getting more disposable income, there's a bit of pent-up demand. There's a lot of people got engaged during COVID, and now they need to go and, you know, consummate their marriages, and so therefore, they'll probably be buying diamonds, and so on. So we do think all the indicators are between what you've highlighted on the screen there, and just generally what's happening, that we think things are almost certainly likely to improve towards the end of this year, so we're very hopeful of that.
Next question is also from Romano, and it's again, on the Russian supply. You've been giving some airtime to the reduction of Russian supply, but when would we expect to see this tangibly impact price?
Yeah, I think I've kind of covered that, Romano. So just, I just wanna clarify, when we say reduction in supply, the Russians are still producing the diamonds. There's been no reduction in the volume that they're producing. But what the hope is, is that that volume does not actually reach the customer, or that the processes make it much harder for that volume to reach the customer. The sanctions are in place only cover the G7 countries, as a reminder, but the good news is the G7 countries consume 70% of the world's diamonds. So that's the whole purpose of those sanctions, is to restrict the flow of those diamonds into the G7 countries. And as I said earlier on, I'm hoping that that'll play out in the H2 of this year.
The next question is about debt repayment. You said there is no debt repayment in 2024. What about the convertible notes?
Yeah, that is a realistic challenge that comes due in September. There's a few options that Brad's working on. I'll get Brad to talk about it. But obviously, if the share price is above $ 0.25, a lot of those noteholders are likely to convert. But then we will be looking at other options, including rolling over, potentially extending the term or a few other options. So Brad, I don't know if you wanna cover that one off some more.
Yeah, no, sorry, that was an oversight from the last question we had. But yeah, so like Kim said, there's, you know, that we would likely- well, we will likely have to pay out some of our convertible debt holders, but yeah, hoping that the share price is in a favorable place where we could get some of those converting to shares. And yeah, so I think it'll be a bit of a mixed bag on the convertible debt, but time will tell.
Okay. The next question is from Stuart. Could you please provide an update on diamond markets and pricing, given realized prices were flat quarter-over-quarter, and the absence of a special auction in Q1 of 2024, does that mean the prices, that pricing is somewhat recovering?
Yeah, Stuart, I think what I've been saying is, if you look at the long-term trend of diamond prices, I'm talking rough diamond prices, and I'm talking aggregate diamond prices, if you have a basket of aggregate diamonds, I think we now have seen—we saw the retreat in 2022 from the prices in 2022. I think by the end of 2023, we were back on what I call long-term trend. So we're back on this long-term trend. If you have a look at Paul Zimnisky's, you know, sort of price prediction, we're sort of back on that long-term trend. At the moment, it's relatively flat, but I think in the second half of the year, we'll start seeing that pick up again. So yeah, I think we, I think we're back on trend, Stuart.
... Okay, the next question is from Sam. Any thoughts or plans on the Naujaat project? Is it too small to scale, unknown yet? What is happening with it?
Yeah, I think right now, it's dormant, Sam, and I think you've really said it in your question here. As long as we've got better options on the Ekati project, which obviously can utilize, you know, an existing infrastructure and an existing process plant, an airport, and people and so on, nearly everything else has to compete with that. So for the Naujaat project to progress, it really must mean that it's got better, a better return, you know, lower capital spend, and, you know, any other characteristics way better than what we've got on our property.
So I think in reality, what that does to Naujaat is it pushes it out in time, and, it'll then need to compete with things like, you know, Jay pipe and some of those other pipes that are out in the future. So it's very much part of the future. It's not a project that will go away. It's not costing us any money to just basically hang on to it. And it's important.
One of the lessons that Brad and I have learned from our De Beers days is, it's so important to have a very healthy pipeline of projects that you can keep your whole business healthy, and that you're progressing that pipeline of projects in a healthy way, all the way through your sort of the life cycle of the asset. So we are already starting to do that with the Ekati asset, making sure we've got a pipeline of development projects to keep the plant full and to keep the cash going, and to keep the returns going.
And then, as Burgundy grows beyond Ekati, we'll be doing exactly the same thing, making sure we've got a pipeline of assets and a pipeline of projects, you know, going out as far as we can get them, whether it's 25 years or 50 years, or whatever we can do.
Okay, this is the last question, so if there are others, please submit them using the Q&A at the bottom of your screen. On page 280 of your prospectus, you listed reference selling prices. Based on your production information shared in the prospectus, this translates to an average weighted selling price of around $180 per carat from Sable and Misery. With the market weakening by 20% since the prospectus was issued, this gives a price of around $145 per carat, yet sales in Q1 were only $89 per carat. They're just asking for an explanation as to why that is.
Yeah, I don't recall that specific page. I mean, what I do recall, my memory, and we'll certainly go back and have a look at it, where the 180 carats comes from. But I think my reference point actually is what the previous owners published in their results for 2022, which was $115 a carat. And when you look at where the prices are now, there's no doubt they have retreated from that $115 a carat, as I mentioned. And so, if you take your 20% that you're quoting there, and we're seeing round about $90-$95, as Brad mentioned, we have seen a price reduction from $115 back down to, say, $95.
But I think as we go out further in this year, I think it'll creep back over $100, and then, hopefully in 2025, it'll go back, you know, back up into the, you know, well over $100 a carat. And that's typically what we see, is it'll, it'll bounce back strongly, and then it'll keep growing as time goes on. But we will check on your question a bit more thoroughly. I wanna go back and check on that $180. I don't recall seeing that number.
Yeah, the other thing, the other thing to note is, like the $80, the $89, like I said, are more normalized, is $95. You have to, you have to exclude the small carryover that we had from the previous year. The other thing, that we didn't have any special stone sales, which obviously drives your $ per carat up quite a bit. So you do have to be careful when you're just looking at a quarter's results only. You're better looking at a longer time horizon.
Yeah, and each of the kimberlite pipes, they have not only a different $ per carat value, I mean, Brad was mentioning some of the $ per carat from Fox and Misery, but they also have a different grade. So the combination of the grade, in other words, how many carats per tonne are in each of the pipes, and the $ per carat, the combination of those two numbers is what really tells you the value of the ore. So you've gotta be a little bit careful, when you sort of just average. And of course, this is where Burgundy is a little bit different from, let's say, you know, some of the mines in Botswana or Lesotho or South Africa.
Often, they are very hard $ per carat, but they're very low volume. And a lot of their hard $ per carat is because they produce very, very large stones, but they just don't produce many of them. So you've just gotta watch out. That's why I always prefer to talk about the margin per carat. It's probably the safer thing to talk about because that's how we run our business. We run it based on the margin per carat, and then and that, the delta between the selling price and the cost gives us the margin, and therefore, that's the cash available for in the business. So that's what we focus on.
Hey, there is actually one more question, also from Romano. It says: I think Brad mentioned that Burgundy expects to produce more carats in Q2. Can you please clarify or, and elaborate on these expectations?
... Yeah, I think I was sort of just giving you the hint there, Romano. I'm probably speaking for Brad here, but we said that the Sable, we produced more carats from Sable in the Q1, but Sable has got lower grade. Once you switch to Misery, Misery is much higher grade and a higher $ per carat, and that's why you get more carats the moment you start introducing more Misery into the blend. And then that's also preempting what I was saying early on. As we go forward into the future, having five sources where we've got, you know, five different options to send material to the plant, lets us play with that mix, and it'll also let us play with the mix depending on what the market's doing.
So if the market actually favors a certain color or style of diamond, then we can accelerate, you know, processing that material. So that's why having multiple sources is so important. And, you know, I guess that's the benefit of our experience in running these diamond assets, is we know that, and that's why we've made sure we accelerate getting multiple options into the mine plan, so it gives us the maximum flexibility.
Okay. I think that's the last of the questions. That wraps up the Q&A session. And I'll just pass it back to Kim for the closing.
Yeah, look, thank you. Thank you, everybody, for doing that. It was fantastic. And thank you, Brad, and thank you, everyone, for dialing in. And you know, as always, I just wanna thank you all for your support and ongoing. You know, the questions are fantastic. We love them, and I think you can probably see now that we are delivering exactly what we said we would do. We've delivered on the mine plan extension, and by the end of the year, we'll be able to publish that. We've delivered on the surety arrangement. I think Brad and his team are doing a tremendous job on delivering on some of the sales opportunities which add value beyond the mine gate. So what you are seeing is a team that delivers, and we do what we say.
The one thing, obviously, now that will come back in our favor is when the market turns around, and then I think we'll start benefiting tremendously from improved cash flow. So watch this space, and once again, thank you for your support.